Bitcoin ETFs Bleed $938M in Single Day as Investors Flee

Bitcoin ETFs experienced a significant plunge as investors withdrew a staggering $938 million in a single day, marking the largest daily outflow ever for these funds. This exodus comes amidst a shaky Bitcoin market, struggling to maintain its position above $90,000. The retreat has extended over six consecutive days, with a total of over $2.4 billion exiting these funds this month alone. Nate Geraci, President of ETF Store, commented on the situation, expressing his surprise at the traditional finance sector's apparent distaste for cryptocurrency.

The massive outflows were led by the Fidelity Wise Origin Bitcoin Fund (FBTC), which saw $344.7 million in redemptions. BlackRock's iShares Bitcoin Trust (IBIT) followed with $164.4 million in withdrawals. These significant redemptions signal a cooling interest among institutional investors, who now compare the returns from Bitcoin ETFs unfavorably with safer assets like U.S. Treasury notes. According to Velo Data, the appeal of cash and carry arbitrage has diminished as the annualized one-month basis in CME Bitcoin futures dropped significantly.

The decline in the premium of CME-listed Bitcoin futures has directly impacted the profitability of carry trades, once a favored strategy by hedge funds. These funds involved buying spot ETFs and simultaneously selling futures to hedge against market movements and capture the premium difference. As of Tuesday, this premium dropped to a mere 4%, a stark decrease from the nearly 15% observed in December. Markus Thielen, head of research at 10x Research, noted that this is a harsh reality check for crypto traders.